The World Auto Parts Market
The North American auto parts market is not alone in experiencing difficult times in the early years of the twenty-first century.
“Fully one-third of auto suppliers, globally, are in financial distress, with 41 percent in the Americas, 24 percent in Europe, and 32 percent in Asia,” reported Neil DeKoker, president of the Original Equipment Supplier Association (OESA), in a presentation made in August of 2006 at a conference on “Rationalizing the Automotive Supplier Industry: Carving Out Profit from M&A [monitoring and evaluation] Activity.”
In its 2006/2007 Industry Review, the OESA reported a 7.3 percent decline in the total world original equipment parts market in 2005 ($781.7 billion) compared to 2004 ($843 billion) after several years of growth, including a 10 percent increase in 2003. Over the longer term, the world market is expected to experience growth, and is expected to exceed $1 trillion annually by 2010. Domestic shipments of automotive and truck parts were reported by the Census Bureau as valued at $200.3 billion dollars, up from $174.6 billion in 1997. The growth rate in this period was 1.73 percent annually, sales are cyclical. In the 1997 to 2005 period, the highest shipments were realized in 2000. Shipments dropped sharply in 2001 as a brief recessionary period set in. By 2005 the industry had again almost reached its 2000 peak in this period.
The U.S. new car and truck market (as contrasted to parts) was one of only two major markets in the world to lose ground, with sales fading 2.5 percent from 16.95 million vehicles in 2005 to 16.52 million vehicles in 2006. Japan was the other declining market. Japanese demand fell 2.5 percent from 5.73 million vehicles in 2005 to 5.59 million in 2006. Western Europe, the largest automotive market in the world, managed to grow slightly during 2006-0.8 percent from 16.52 million units in 2005 to 16.65 million in 2006. The emerging markets of the world, on the other hand, experienced more robust growth-other European countries were up a combined 8.1 percent; Brazil and Argentina, 13.3 percent, and the other markets of the world, 14.6 percent. These anemic sales figures for new vehicles plus increasing pressure from auto parts suppliers in emerging economies were key contributors to the slow growth shown by domestic auto parts suppliers.
Exports from emerging economies countries have been growing at an annual rate of 20.1 percent, well above the export growth rate from more industrialized countries (12.7%). Automotive parts trade with China is an example of the impact imports from emerging economies can have. This trade has grown significantly. The United States imported $1.6 billion worth of auto parts from China in the year 2000. Seven years later, in 2006 the United States imported $6.9 billion worth of auto parts from China, an increase of 313 percent or nearly a 50 percent increase annually during the first years of the twenty-first century.
